RECOVERABLE COST: THE BASIS OF A GENERAL THEORY OF FINANCIAL ACCOUNTING MEASUREMENT

Stanley Salvary

General Economics and Teaching from University Library of Munich, Germany

Abstract: This paper addresses a very profound question concerning financial accounting. Is financial accounting measurement. as represented by diverse valuation rules. hodgepodge or is it logically developed? Salvary [1985. p.28. Chap. IV] advances and provides a theoretical development of the concept of 'recoverable cost' as the measurement property observed in (underlying) financial accounting measurement. Sa/vary [1989, pp.50-51] maintains that 'recoverable cost' is the center of 'economic gravity' and demonstrates that this valuation is derivable from axioms advanced. This paper provides a rigorous proof that 'recoverable cost' is the observed measurement property underlying financial accounting measurement. This analysis draws upon: (a) the concept of recovery underlying the investment decision and (b) the distinction between decision theory and measurement theory. It establishes recoverable cost as the measurement property in financial accounting and leads to the conclusion that financial accounting measurement is logically developed.

Keywords: measurement rules; capital budgeting; realizable value; lower of cost and market; capitalization; depreciation; decision theory; market simulation; asset specificity. (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Pages: 35 pages
Date: 2005-01-20
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-hpe
Note: Type of Document - pdf; pages: 35
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